Prius Buyers Stall Dealers to claim Tax Credit

http://www.usatoday.com/money/autos/2005-1...brid-usat_x.htm

By Chris Woodyard, USA TODAY

LOS ANGELES — Buyers of the popular Toyota Prius hybrid, after waiting months to get their cars, now are telling dealers to keep them until next month so the buyers can qualify for what's likely to be a much bigger hybrid tax break in 2006.

"I've got cars on the ground that I'd had (on) order for 18 months, and the customers want delivery after the first of the year," says Debbie Tufts, new car sales manager at Rudy Luther Toyota in Golden Valley, Minn.

"We have seen it around the country," Toyota spokeswoman Nancy Hubbell says.

Stating Jan. 1, buyers of gas-electric hybrid vehicles get tax credits that could lower their income tax bills as much as $3,150, according to an analysis by the American Council for an Energy-Efficient Economy.

The IRS hasn't set the amounts, but the size of the credit depends largely on the government's fuel-economy rating of the vehicle in city driving. Prius' 60 mpg city rating makes it likely to qualify for the maximum, ACEEE says. That's why it's mainly Prius buyers putting their vehicles on hold. Ford Motor and Honda say they haven't noticed the phenomenon with their hybrids, and Toyota hasn't seen it with other Toyota and Lexus hybrids.

Estimated hybrid tax credits
Brand Model EPA mpg city/hwy Total tax credit

Chev/GMC Silverado/Sierra 2WD 18/21 $250
Chev/GMC Silverado/Sierra 4WD 17/19 $650
Ford Escape Hybrid 2WD 36/31 $2,600
Ford Escape Hybrid 4WD 33/29 $1,050
Honda Civic Hybrid* 49/51 $2,100
Honda Insight 57/56 $1,450
Lexus RX 400h 31/27 $2,200
Toyota Highlander Hybrid 2WD 33/28 $2,600
Toyota Highlander Hybrid 4WD 31/27 $2,200
Toyota Prius 60/51 $3,150
* — for automatic; $1,700 credit for manual transmission model

Sources: American Council for an Energy-Efficient Economy, EPA

The current tax break for buying a gas-electric hybrid vehicle is a $2,000 deduction. That translates to a tax cut of just $700 to someone in the 35% tax bracket; $560 in the 28% tax bracket; $300 in the 15% bracket.

Toyota dealer Mike Sullivan says he has about a dozen Prius buyers waiting until next year at dealerships in Hollywood and Santa Monica. "They actually said, 'Put it off until the first week of January,' " he says.

"It seems like a no-brainer to me," says Larry Starr-Karlin, 67, a Los Angeles psychotherapist who told Toyota Santa Monica to hold his Prius until January.

Actor Scott Michael Campbell, 34, also of Los Angeles, says dealers e-mail him when Priuses arrive, but he rejects them to wait for the tax credit.

When a buyer says "no," a dealer usually sells that Prius to someone else and contacts the original buyer when another Prius comes in that has the same equipment and is the same color. Some dealers, however, are simply holding the cars because Jan. 1 is so close.

Waiting too long could backfire. The juicy tax credit begins to phase out after an automaker sells 60,000 of the hybrid vehicles.

Toyota forecasts that Priuses sold the first three quarters of 2006 will qualify for the full credit. Automakers who sell fewer hybrids will be able to entice buyers with the credit into 2007 or beyond.